Basically, as long as an occupying nation is not willing to make the occupied people true citizens, they have no real legal power over them. It's like them being eternal visitors to your country---even worse, enforced visitors. They may honour your laws out of courtesy or out of the wish to fit and belong there, but they will never identify themselves with the occupator as being their own country. They get no legal rights, so why should they obey a legal duty? Would you?

You may ask what power keeps the order instead, if not the law? It's back to military force. Threats. Instilling fear through injustice. Literally anything that works. As the soldier said:

Forget for a moment that I actually think that all those Jews [who settled in the West Bank] are mad, and I actually want peace and believe we should leave the territories, how dare you say no to me? I am the Law! I am the Law here!

So as shocking as the happenings in Abu Ghraib may have been, something like that is bound to happen anywhere people are subdued. You may even draw conclusions about your local prison scandals. This is a fundamental mechanic at work. Actual peace is impossible in such a situation.

The only road to peace is the one where you treat occupied people like equals, under a consistent set of rights and rules. But then it wouldn't be occupation anymore. Occupations can't work for long, they never did, but some rulers don't get it.